Brussels (AFP)

The European Commission announced on Wednesday the opening of an in-depth investigation into the merger between French car manufacturers PSA (Peugeot, Citroën) and Italian-American Fiat Chrysler (FCA), which is to give birth to the world number four in the sector.

The European executive fears that the operation would harm competition in the commercial vehicle market, in which the two groups occupy "a strong position", explained its vice-president, Margrethe Vestager.

"The two companies will continue to cooperate with the European Commission to answer its questions in the same constructive spirit that has defined the merger project from the start," reacted a spokesperson for PSA to AFP.

"PSA and FCA reaffirm the common objective of concluding the transaction by the end of the first quarter of 2021," he added.

The Commission, guardian of competition in the EU, has recently been criticized for its rules which do not sufficiently favor the creation of "European champions" against foreign giants. It has promised to update its legislation.

The top three in the global automotive market, in terms of the number of vehicles sold, included at the end of 2019 the German group Volkswagen, the Franco-Japanese alliance Renault-Nissan-Mitsubishi and the Japanese Toyota.

The proposed PSA-FCA merger had been notified to the Commission on May 8. After a preliminary investigation, the two groups decided not to make commitments - such as the sale of activities or sites, for example - to respond to the concerns of Brussels.

The European executive has until October 22, 2020 to make its decision.

Commission fears operation will reduce competition on light commercial vehicles weighing less than 3.5 tonnes in 14 Member States (Belgium, Croatia, Czech Republic, Spain, France, Greece, Hungary, Italy, Lithuania, Luxembourg, Poland , Portugal, Slovakia, Slovenia), as well as in the United Kingdom.

According to her, the merger risks removing "a significant competitive constraint for both parties", which is all the more problematic since "a new entry on the market seems unlikely on a significant scale".

- Power of veto -

The Italian-American manufacturer owns the brands Fiat, Chrysler, Jeep, Maserati, Alfa Romeo, Dodge and Ram, and the French Peugeot, Citroën, DS, Opel and Vauxhall.

Together, the two groups cumulated in 2019 around 170 billion euros in turnover and sold nearly 8 million vehicles.

They have always said they were determined to finalize their merger at the end of 2020-early 2021, despite the coronavirus pandemic which caused the car market to collapse and caused each of them a heavy quarterly loss.

Fiat Chrysler sales fell 16% in the first three months of the year to 20.56 billion euros. The group sold 818,000 vehicles over this period, 21% less than a year ago.

PSA saw its turnover plummet 15.6% to 15.2 billion euros. It sold 627,000 vehicles, which is 29% less than last year.

The second quarter looks even worse, with the European automotive market at half mast, affected by the closure of dealerships in many countries.

The commercial vehicle market, technically rudimentary models but sold at good prices, is very lucrative in Europe.

PSA weighed in 2019 more than a quarter of this market on the continent. The Fiat group adds an additional 9%. The whole would therefore accumulate more than 34% market share, twice the number 2, Renault, which is 16.4%.

Brussels announced last December its intention to dust off European competition rules, but without going as far as what Paris and Berlin hoped for, particularly scalded by the 2019 ban on the Siemens-Alstom union.

The Commission, which has had a veto right since 1989 on major merger projects, has not often used it.

In almost 30 years, more than 6,000 mergers have been approved and less than 30 have been blocked.

© 2020 AFP